39 F. 309 | U.S. Circuit Court for the District of Eastern Virginia | 1889
The question in this case is upon the amount of a tax assessed by the city of Richmond upon a national bank, and upon the manner of assessing and collecting it. It was competent for congress to
In this condition of the law, the defendant F. W. Cunningham, city collector of the city of Bichmond, presented for payment a tax-bill to the First National Bank of Bichmond, the complainant here, made out as follows:
*311 1889.
lir. H. C. Burnett, Cashier of the First National Bank of the City of Richmond, to the City of Biehmond, Dr.
For taxes upon shares of stock - $840,000
Less value of real estate - 38,320
$801,680 at 1.4—$11,223 52
Whereupon the bank exhibited in this court its hill of complaint against the city of Richmond and its collector, praying an injunction against the collection of the tax. A temporary injunction was granted, and the case is now hoard for a final decree, either of perpetuation or dismissal. The bill recites that the capital of the bank is $600,000, (which seems to have produced a surplus fund of $240,000;) that the par value of its shares (6,000 in number) is $100, and their market value $140; that its capital consists in part of—
Beal estate, (specifically taxed,) worth - - - - $ 38,000
United States bonds, (non-taxable) .... 134,000
Virginia state bonds, (non-taxable,) » - - <> 64,500
City of Richmond bonds, (non-taxable,) ... 49,000
Stock in the Union Bank of Biehmond, (whose tax is paid by that bank,) -------- 10,500
Aggregating .... ... $296,000
—all of which property is tax-paid or non-taxable as against the First National Bank.
The bill charges that the city imposes, and requires the bank to pay, the tax of one and four-tenths per cent, upon the market value of its shares, without allowance of any deduction for the non-taxablo securities and specifically taxed property thus shown to be held by the hank; and charges also that this tax is so assessed that the owners of the shares thus taxed are deprived of the privilege, allowed other moneyed capitalists, of deducting from the amount of securities held by them, including their shares, respectively, the amount of bonds, securities, liquidated claims, and demands due from them respectively to others. It complains that, besides this discrimination against its own individual shareholders in favor of other moneyed capitalists, the city unlawfully discriminates against the banks of the city, as corporations, in favor of corporations which are taxed on their capital stock, all of which latter are allowed to deduct the amount of exempted securities held by them from the values assessed against them. Thus it is charged that, contrary to national, state, and municipal law, the tax levied against the shareholders of the complainant, under the present system of taxation enforced by the city of Richmond, discriminates against them in three particulars, viz.: (1) Other corporations get the benefit of relief from taxation upon all nontaxable securities which form part of their capital, in which relief their shareholders participate; whereas, under the method of taxation complained of, this bank’s shareholders are deprived of such relief as to nearly half the amount of its original capital. (2) The tax being as
It is apparent from an inspection of the tax-ticket and the provisions of law under consideration that the discriminations complained of by the bill must result from an enforcement of the tax. There is no room for doubt of the fact that the city of Richmond, in assessing the tax complained of in the manner described in the bill, does discriminate against shareholders of national banks, in favor of other moneyed capitalists, in all the respects specified, and that this discrimination violates alike a leading provision of section 5219 of the United States Revised Statutes,, a like provision of the tenth article of the Virginia constitution, and a. just provision of an ordinance of Richmond conferring a privilege of great importance upon all holders of taxable securities, who themselves-owe debts. The fact, is too obvious to need illustration; and the only question for this court, as a federal court, is whether the decisions of the-supreme court of the United States, in cases on this subject which have-gone before it, have sanctioned or condemned such discriminations. A considerable, number of cases involving the construction of section 5219 of the United States Revised Statutes have gone to that court, in which the complaint has been of discriminations against national banks .and their shareholders, in favor of owners of other moneyed capital, in the assessment of taxes by the states. In most of them.the court has upheld the tax; in others it has pronounced against it. From the nature of the subject, each case has presented its own special facts, and has differed in these facts from every other case. Up to this time no case of this class-has gone from Virginia, and none, like the one at bar, has presented a scheme of taxation charged to be in violation at once of national, state, and municipal law. The supreme court has dealt liberally with the tax laws of the states which have been brought under its review. It has-held that the shares of national banks may be taxed by the states, though no provision be made in assessing it for deducting from computation the always large amount of United States bonds held by the banks. It has held that the tax upon the shares of these banks may be assessed upon and collected from the banks themselves. It has held that neither of these circumstances in itself vitiates a tax. Even in cases where it has appeared that the system of taxation enforced by a state has operated unequally as between shareholders of national banks and owners of other moneyed capital,, the court has not looked upon the system with unfriendly scrutiny and illiberal spirit; but in cases where the discrimination was trivial or technical, or such as must always result from the greater or less imperfection of all human legislation, it has declined to
In deciding that shareholders of national hanks may he taxed at a rate in fixing which no account has been taken of the non-taxable United States bonds required by law to be held by those banks, the court has not made so absolute a ruling that, if it should be shown in any particular case that such omission operates as a material and injurious discrimination against national bank shareholders, in favor of other moneyed capitalists, the tax thus operating may not be pronounced illegal. The paramount question in every case is whether or not the tax, or system of taxation, complained of, materially and injuriously discriminates against national bank shareholders, in favor of other moneyed capitalists, in a degree tending to discourage investments in the shares of the national banks. Upon this question of fact the decisions of the supreme court have turned, and all decisions on this subject must turn. As already indicated, I do not think the tax complained of in the case under consideration can stand this test. The question need not be decided in the present case; but it is doubtful whether congress, in authorizing the states to tax the shares of national banks, under legislation of their own, proscribing the manner and place of doing so, intended thereby to authorize cities, counties, and towns to exercise the same power. The mere fact that municipal corporations may tax national banks at their pleasure would tend strongly to discourage investments in their shares; and no instance of such a tax has yet gone to the supreme court of the United States; but if the right exists, and if the city of Richmond may legitimately impose a tax on the national banks doing business within it, yet I think that the tax complained of here is one whose necessary efiect must be to discourage investments in national hanks. Congress requires the tax to be assessed as part of the personal property of the owners of the shares of the bank. It does not authorize a tax upon the bank itself. The city has no power to assess a tax upon the bank in solido. It can assess only the shares, and these only as the property of the shareholders. There are 6,000 shares of the stock of this complainant, held doubtless by hundreds of different persons residing in Richmond and other cities, and in the counties surrounding Richmond, and in the state at large. By section 5210 of the United States Revised Statutes congress requires every national bank to keep at all times for public inspection “a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each, in the office where its business is transacted.” If it be within the legal power of the city of Richmond to tax the shares of those stockholders of the national banks here who are residents of the city, certainly that is the extent of its